Knowledge @ Wharton

That'd be the Wharton School of Business, which for my money is a better bizskool than, say, HBS. But sometimes I do have a problem with what they say.

From an interview with Wharton professor Peter Capelli, here, about Michael Dell's reassumption of management responsibilities at Dell Computer:

Knowledge@Wharton: One of the first things that Dell had done after taking charge [again] was to send out this memo that we just heard about, saying that there would be no bonuses for 2006. He described the year as one in which there had been great efforts, but not great results. Do you think that doing away with bonuses is a good idea?

Cappelli: Well, I think that with all management changes like this, there is the distinction between the symbolism and the substance. With respect to this particular case, the end of bonuses -- particularly articulated by not only the founder, but the guy who has the biggest financial stake in the company -- is really kind of a powerful message.

And, it's a powerful message that comes from the owners ... that something has got to change. So it certainly is on the symbolism ground, an important statement to shake people up. I think it's also a statement to the investment community and to outsiders, too, that we're taking this seriously. Does it de-motivate people? Yes. Are there some down sides to that? The answer is yes, probably.

I think one of the questions you ask yourself is: What is the purpose of this? And I think a lot of the purpose is the symbolism and the messages to not just insiders, but to outsiders.

He's missing the point, I suggest. When a very wealthy person says 'You guys, no bonuses for you', it sends the message that performance is insufficient to warrant them -- which is good, but not great; at what level will they be warranted again? -- but it doesn't matter that the guy saying it is the guy with the biggest stake. What matters is, can he enforce it (obviously, yes), and will it be enforced equitably (hope so).

Otherwise, it'll be Dudes, you're getting screwed...and you had no control over it.